Synopsys Inc. (NASDAQ:SNPS)

Current Income Tax Expense

The current income tax expense exhibits a fluctuating yet generally increasing trend over the period analyzed. Beginning at $95,759 thousand in 2019, the expense decreased slightly in 2020 to $86,238 thousand but then surged significantly in 2021 to $177,738 thousand. Although there was a minor reduction in 2022 to $173,991 thousand, the current tax expense escalated sharply thereafter, reaching $294,702 thousand in 2023 and further rising to $475,688 thousand in 2024. This pattern suggests growing taxable income or changes in tax rates or regulations impacting current tax liabilities.

Deferred Income Tax Expense

The deferred income tax expense, presented as a benefit due to negative values, shows considerable variability but generally deepens in magnitude over the years. It started at a benefit of $82,620 thousand in 2019, which increased in magnitude to $111,526 thousand and $128,583 thousand in 2020 and 2021 respectively. In 2022, the deferred tax benefit decreased markedly to $36,913 thousand, indicating a significant reduction in deferred tax liabilities or an increase in deferred tax assets. However, this benefit expanded again in subsequent years to $211,045 thousand in 2023 and further to $375,970 thousand in 2024, suggesting substantial changes in temporary differences or tax planning strategies.

Provision (Benefit) for Income Taxes

The overall provision for income taxes, which combines current and deferred components, shows volatility throughout the years. There was a small provision of $13,139 thousand in 2019 followed by a substantial benefit (negative provision) of $25,288 thousand in 2020, aligning with the negative deferred tax effect. The provision reversed strongly in 2021, increasing to $49,155 thousand, and experienced a sharp rise in 2022 to $137,078 thousand. The figure then declined to $83,657 thousand in 2023 before increasing again to $99,718 thousand in 2024. This variability reflects the interplay between current and deferred tax expenses and indicates shifts in taxable income recognition and deferred tax adjustments.

Summary of Observations

Overall, the data reveals that while current income tax expenses are on an upward trajectory, reflecting possibly higher taxable earnings or tax rate changes, the deferred tax benefits fluctuate more markedly, indicating varying timing differences or adjustments in tax planning. The provision for income taxes follows a similar mixed pattern, influenced by significant changes in deferred tax components. The increasing magnitude of both current and deferred tax figures in recent years points toward heightened tax expense volatility and complexity in accounting for income taxes.

The statutory federal income tax rate for the observed periods remains constant at 21%, indicating no changes in the statutory tax framework affecting the entity directly over these years.

In contrast, the effective income tax rate exhibits notable variability across the periods. Starting at a low effective rate of 2.41% in 2019, it decreases further to a negative 3.96% in 2020, which suggests the recognition of tax benefits, such as tax credits or carryforwards, or adjustments leading to net tax gains rather than expenses. The rate rebounds to a positive 6.1% in 2021, followed by an increase to 12.29% in 2022, marking the highest effective tax rate in the timeline yet still significantly below the statutory rate.

Subsequent years see a decline in the effective tax rate again to 6.43% in 2023 and a slight increase to 6.59% in 2024. The overall trend suggests persistent divergence of the effective tax rate from the statutory rate, indicating the company’s tax expense is affected by factors such as tax incentives, adjustments, and possibly variations in pre-tax earnings composition. The consistency of the statutory rate alongside the volatility in the effective rate underlines active tax management or variable tax circumstances impacting the net tax expense reported.

The financial data over the analyzed periods reveal multiple significant trends in the company's deferred revenue, asset composition, liabilities, and tax-related items.

Deferred Revenue

Deferred revenue initially appeared at 2,367 thousand USD in 2020 and exhibited growth, peaking at 41,941 thousand USD in 2022, then decreased somewhat to the range of approximately 37,600 to 37,800 thousand USD in the latest two years. This pattern suggests a rise in customer prepayments or advance billing followed by a stabilization or slight decline recently.

Deferred Compensation

There is a consistent upward trend in deferred compensation, rising steadily from 56,483 thousand USD in 2019 to 73,869 thousand USD in 2024. This indicates increasing liabilities related to employee compensation obligations over time.

Intangible and Depreciable Assets

These assets show a declining trend, descending from 160,072 thousand USD in 2019 down to 65,489 thousand USD in 2024. The decline suggests ongoing amortization and depreciation surpassing capital additions, reflecting a reduction in net carrying amounts for intangible and depreciable assets.

Capitalized Research and Development Costs

A notable and steep increase in capitalized R&D costs is evident, rising from 48,804 thousand USD in 2019 to an exceptionally high 978,085 thousand USD in 2024. This surge may indicate intensified investment in product development or capitalization of substantial expenditure in innovation initiatives.

Stock-based Compensation

The company’s stock-based compensation expense rose markedly from 20,372 thousand USD in 2019 to 74,934 thousand USD in 2024, reflecting either increased grant activity or higher valuation of equity awards over the years.

Tax Loss, Foreign Tax, and Research Credit Carryovers

Tax loss carryovers decline overall, from 40,068 thousand USD in 2019 to 37,787 thousand USD in 2024, with intermediate fluctuations. Foreign tax credit carryovers fluctuated but showed an increasing tendency since 2021, reaching 42,534 thousand USD in 2024. Conversely, research and other tax credit carryovers peaked in 2021 at 326,164 thousand USD but have since fallen sharply to 107,643 thousand USD in 2024. These changes suggest variations in tax planning and utilization of tax credits over time.

Operating Lease Liabilities and Right-of-Use Assets

The operating lease liabilities rose to a peak of about 119,575 thousand USD in 2022 before declining moderately to 108,235 thousand USD in 2024. Correspondingly, right-of-use assets showed negative balances increasing in magnitude, indicating consistent recognition of these lease-related assets and liabilities but with a slight reduction in lease obligations in the latest years.

Accruals and Reserves

New accruals and reserves values appeared in the later years with amounts of 27,636 thousand USD in 2023 and increasing to 49,935 thousand USD in 2024, suggesting growing provisions or liabilities recognized in recent periods.

Gross Deferred Tax Assets, Valuation Allowance, and Deferred Tax Assets

Gross deferred tax assets increased significantly over the period, from 624,368 thousand USD in 2019 to 1,576,360 thousand USD in 2024. The valuation allowance also increased in absolute terms, peaking at 229,259 thousand USD in 2023 but then declined to 170,672 thousand USD in 2024. Net deferred tax assets rose correspondingly, indicating improving future tax benefit realizations after allowances.

Intangible Assets Net Balances

Intangible assets carry negative balances throughout the periods with an increasing magnitude up to 2023 (-116,465 thousand USD), followed by a reduction to -80,034 thousand USD in 2024, reflective of amortization or impairment activities.

Undistributed Earnings of Foreign Subsidiaries

This item fluctuated considerably, with negative balances peaking at about -8,900 thousand USD in 2023 and slightly improving to -8,800 thousand USD in 2024 after a prior reduction. This pattern may indicate varied profitability or dividend distributions in foreign operations.

Deferred Tax Liabilities and Net Deferred Tax Assets

Deferred tax liabilities increased substantially from -78,384 thousand USD in 2019 to a high of -237,439 thousand USD in 2023, then decreased to -194,987 thousand USD in 2024. The overall net deferred tax assets showed marked increasing values, especially from 657,198 thousand USD in 2022 to 1,210,701 thousand USD in 2024, signaling growth in tax assets exceeding liabilities during this period.

The financial data reveals a steady increase in deferred tax assets over the analyzed periods. Starting from approximately $390 million in 2019, the value grows consistently each year, reaching nearly $1.25 billion by 2024. This indicates an expanding amount of temporary differences or carryforwards that could result in future tax benefits for the company.

Deferred tax liabilities also show an increasing trend but at a much slower pace relative to deferred tax assets. Beginning from a relatively low base of about $1.5 million in 2019, the liabilities increase to approximately $36.6 million by 2024. Although this represents a significant percentage growth, the absolute values remain substantially lower than the deferred tax assets.

The widening gap between deferred tax assets and liabilities suggests that the company's net deferred tax position is becoming increasingly positive. This divergence could imply that the company expects to benefit from more deductible temporary differences or loss carryforwards in future periods. The consistent rise in deferred tax assets may also reflect enhanced investment activities or increased recognition of tax credits and loss carryforwards.

Overall, the pattern indicates a favorable tax position in terms of deferred tax accounting, with potential positive implications for future tax expense reductions. However, the company should continue to monitor the realization of these deferred tax assets, ensuring that future taxable income will be sufficient to utilize them effectively.

Total Assets

Both reported and adjusted total assets demonstrate a consistent upward trajectory over the six-year period. Reported total assets increased steadily from approximately $6.4 billion in 2019 to about $13.1 billion by 2024, nearly doubling. Adjusted total assets mirror this trend, rising from around $6.0 billion to $11.8 billion. The gap between reported and adjusted assets remains relatively stable, suggesting consistent adjustments related to deferred income tax considerations.

Total Liabilities

Total liabilities, both reported and adjusted, increased between 2019 and 2023 but showed a slight decline in 2024. Reported total liabilities grew from approximately $2.3 billion in 2019 to a peak near $4.15 billion in 2023 before decreasing to around $4.05 billion in 2024. Adjusted liabilities follow a similar pattern with values slightly lower but closely tracking the reported amounts, indicating that deferred tax adjustments have a minor impact on total liabilities. Overall, liabilities grew at a slower rate than total assets across the period.

Stockholders’ Equity

Stockholders’ equity, both reported and adjusted, shows a strong upward trend throughout the period. Reported equity increased from about $4.1 billion in 2019 to approximately $9.0 billion by 2024, more than doubling. Adjusted equity also rose substantially, from $3.7 billion to $7.8 billion, maintaining a consistent gap with reported figures. The equity growth rate appears to accelerate in the last two years, particularly reflected in the 2024 figures, indicating strengthening financial position and retained earnings after income tax adjustments.

Net Income Attributed to Synopsys

Net income, both reported and adjusted, exhibits a robust growth trend. Reported net income increased steadily from $532 million in 2019 to $2.26 billion in 2024, showing significant profitability improvement. Adjusted net income follows a similar pattern, increasing from $450 million to approximately $1.89 billion. The difference between reported and adjusted net income widens over time, suggesting increasing impacts from deferred income tax adjustments or other tax-related items. The sharp increase in net income after 2022 indicates strong operational performance and effective tax management.

Overall Analysis

The financial data indicate consistent growth in assets, equity, and net income over the six-year span, with liabilities growing more modestly and even declining slightly in the last year. The increasing divergence between reported and adjusted figures across most categories points to significant and consistent income tax-related adjustments impacting the financial statements. The company’s improving profitability and expanding equity base suggest strong operational efficiency, enhanced earnings power, and a stable financial foundation.

Net Profit Margin

The reported net profit margin exhibited a generally increasing trend from 15.84% in 2019 to 36.94% in 2024, with a notable sharp rise between 2023 and 2024. The adjusted net profit margin followed a similar pattern, increasing from 13.38% in 2019 to 30.8% in 2024. However, the adjusted margin showed a slight dip in 2023 compared to 2022 before the notable increase in 2024, suggesting some variability in performance adjustments over time.

Total Asset Turnover

Reported total asset turnover fluctuated over the years, starting at 0.52 in 2019, decreasing to a low of 0.46 in 2020, then increasing to a peak of 0.57 in 2023 before declining again to 0.47 in 2024. Adjusted total asset turnover similarly showed variability but consistently maintained higher values than the reported figures, peaking at 0.62 in 2023 and declining to 0.52 in 2024. Overall, asset efficiency showed improvements with fluctuations, particularly in the last year.

Financial Leverage

Financial leverage ratios, both reported and adjusted, demonstrated a steady upward trend from 2019 to 2023, indicating increasing use of debt or financial obligations to finance assets. Reported leverage rose from 1.57 in 2019 to 1.68 in 2023 before declining to 1.45 in 2024. Adjusted leverage showed a similar trajectory, increasing from 1.63 in 2019 to 1.78 in 2023 then dropping to 1.52 in 2024. This suggests a potential shift towards more conservative capital structure management in the most recent year.

Return on Equity (ROE)

Reported ROE improved consistently from 13.04% in 2019 to 25.17% in 2024, reflecting growing shareholder value generation. Adjusted ROE followed a similar upward trend, rising from 12.17% in 2019 to 24.26% in 2024. Notably, the adjusted ROE showed a sharper increase from 2021 onward, surpassing reported ROE in 2022. This indicates improved profitability after adjustments related to taxes and other factors, highlighting healthy returns to equity holders over the period.

Return on Assets (ROA)

The reported ROA gradually increased from 8.31% in 2019 to 17.31% in 2024, with significant growth observed between 2022 and 2024. Adjusted ROA exhibited a close pattern, starting at 7.48% in 2019 and reaching 15.96% in 2024. Both measures reveal enhanced asset profitability and operational efficiency over time. The faster increase in reported metrics post-2022 suggests stronger profitability recognition in reported results compared to adjusted figures.

Net Income Trends

The reported net income attributed to the company exhibited a consistent upward trajectory from 2019 through 2024. Starting at $532,367 thousand in 2019, it increased steadily each year, nearly doubling from $1,229,888 thousand in 2023 to $2,263,380 thousand in 2024. Similarly, the adjusted net income followed the same positive trend, increasing from $449,747 thousand in 2019 to $1,887,410 thousand in 2024, showing substantial growth over the six-year span.

Profit Margin Evolution

The reported net profit margin showed a general increase from 15.84% in 2019 to 36.94% in 2024. This improvement was particularly notable in 2024, with the margin nearly doubling compared to the prior year (21.05% in 2023). The adjusted net profit margin mirrored this trend but at slightly lower percentages, rising from 13.38% in 2019 to 30.8% in 2024. The year 2024 again marked a significant jump, indicating enhanced operational profitability or favorable adjustments impacting net margins.

Relative Comparison of Reported vs Adjusted Figures

Throughout the period observed, the reported net income and reported net profit margin consistently exceeded their adjusted counterparts, although the adjusted results trended similarly. This suggests that non-recurring items or tax adjustments accounted for a portion of the net income but did not fundamentally alter the overall growth and profitability trends. The narrowing or widening of the gap between reported and adjusted figures over time could reflect changes in deferred tax impacts or one-time events.

Overall Insights

The data indicates strong financial performance improvement over the six-year horizon, both in absolute net income terms and in profitability measures. The marked increase in 2024 for both net income and margin suggests a significant positive event or operational enhancement during that year. The persistent growth trend in adjusted figures confirms that the underlying business profitability has strengthened, not solely driven by tax or reporting adjustments.

The analysis of the financial data over the six-year period reveals several notable trends in the company's asset base and asset efficiency metrics.

Total Assets

The reported total assets show a consistent upward trajectory from approximately 6.4 billion US dollars in 2019 to over 13 billion in 2024, more than doubling in size. This indicates sustained growth in the company's asset base.

The adjusted total assets, which account for deferred income tax adjustments, similarly exhibit growth from about 6.0 billion US dollars in 2019 to over 11.8 billion in 2024. Although the adjusted figures are consistently lower than the reported amounts, the upward trend mirrors that of the reported assets, underscoring overall asset expansion even when adjustments are considered.

Asset Turnover Ratios

Reported total asset turnover ratio fluctuates within a relatively narrow range. Starting at 0.52 in 2019, it dips to 0.46 in 2020 and then recovers to peak at 0.57 in 2023, before declining to 0.47 in 2024. This pattern suggests variability in how effectively the company generates revenue from its asset base on a year-to-year basis, with improvements noted up to 2023 followed by a reduction in 2024.

The adjusted total asset turnover ratio follows a comparable pattern but consistently registers higher values than the reported ratio. It increases from 0.56 in 2019 to a peak of 0.62 in 2023, then decreases to 0.52 in 2024. This indicates a somewhat more efficient utilization of assets after adjustment for deferred income taxes, although similarly affected by the decline in the final year.

Comparative Insights

The difference between reported and adjusted figures highlights the impact of deferred income tax adjustments on asset valuation and turnover metrics. The adjusted turnover ratios being higher than reported suggests that tax adjustments make the asset base appear smaller, thus enhancing turnover ratios and suggesting better asset efficiency under this perspective.

The decline in turnover ratios in 2024, despite continued growth in total assets, may indicate that asset growth outpaced revenue generation capacity in that year or potential operational inefficiencies emerging during that period.

The analysis of the reported and deferred income tax adjusted financial data reveals several noteworthy trends over the six-year period ending October 31, 2024.

Total Assets

Both reported total assets and adjusted total assets show a consistent upward trend throughout the period. Reported total assets increased from approximately 6.41 billion US dollars in 2019 to around 13.07 billion US dollars in 2024, representing more than a twofold increase. Adjusted total assets followed a similar pattern, rising from about 6.02 billion to approximately 11.83 billion US dollars over the same timeframe. The growth indicates steady expansion of the company's asset base, although the adjusted values are consistently lower than the reported amounts, reflecting the impact of deferred income tax adjustments.

Stockholders’ Equity

Reported total stockholders’ equity also experienced growth, increasing from roughly 4.08 billion US dollars in 2019 to nearly 9.0 billion US dollars in 2024. Adjusted stockholders’ equity displays a parallel pattern, climbing from about 3.69 billion to 7.78 billion US dollars. Similar to total assets, the adjusted equity figures are consistently below the reported ones but maintain a steady upward trajectory. This suggests that the company has been able to grow its net worth over time, indicating potentially improving financial health.

Financial Leverage

The reported financial leverage ratio (total assets divided by stockholders’ equity) increased gradually from 1.57 in 2019 to a peak of 1.71 in 2022, then moderately decreased to 1.45 in 2024. This suggests that the company initially increased its use of debt or liabilities relative to equity but started reducing leverage more recently. Adjusted financial leverage follows the same general pattern, starting at 1.63 in 2019, increasing to 1.80 in 2022, then declining to 1.52 in 2024. The adjusted leverage ratios are slightly higher than the reported ones in all years, implying that deferred tax adjustments result in a somewhat higher perceived leverage.

Summary

The company has shown substantial growth in assets and equity over the six years analyzed, indicating expansion and strengthening of its capital base. The financial leverage trends suggest an initial increase in leverage risk, followed by a conservative shift toward reducing reliance on debt financing after 2022. Deferred income tax adjustments consistently reduce asset and equity values and slightly increase leverage ratios, highlighting the importance of considering these adjustments for a more accurate financial assessment. Overall, the data reflects a company that is growing while managing its capital structure to balance growth and financial stability.

The data reveals a consistent upward trajectory in both reported and adjusted net income over the six-year period. Reported net income increased significantly from approximately $532 million in 2019 to over $2.26 billion in 2024. Similarly, adjusted net income shows a steady rise from about $450 million to nearly $1.89 billion during the same timeframe, though it remains persistently lower than the reported figures, indicating adjustments that reduce net income for certain non-recurring or non-cash items.

Total stockholders’ equity also demonstrates a robust growth pattern. Reported equity increased from roughly $4.08 billion in 2019 to $8.99 billion in 2024, while adjusted equity grew more moderately from approximately $3.69 billion to $7.78 billion. The gap between reported and adjusted equity denotes that some components are being excluded in the adjusted figures, possibly related to deferred tax considerations.

Return on equity (ROE) trends further underscore the company’s improving profitability relative to shareholder investments. Reported ROE steadily rose from 13.04% in 2019 to 25.17% in 2024, showing an acceleration particularly after 2021. The adjusted ROE mirrors this upward trend, rising from 12.17% to 24.26% over the period. Notably, adjusted ROE exhibits a sharper increase between 2021 and 2022, surpassing the reported ROE in that year, before converging closely in subsequent years.

Overall, the financial performance indicates sustained growth in net income and equity bases, accompanied by steadily improving returns to shareholders. The adjusted measures, which remove certain tax-related impacts, display similar trends but at generally lower absolute levels, suggesting a conservative approach to profitability assessment that adjusts for financing and tax structure effects.

Net Income Trends

Both reported and adjusted net income consistently increased, with reported net income more than quadrupling over the six-year span. Adjusted figures confirm substantial growth but at a consistently lower level, reflecting exclusions of certain tax effects or one-time items.

Equity Growth

The stockholders’ equity metrics showed strong advancement, nearly doubling in reported terms and increasing substantially on an adjusted basis. The difference highlights deferred taxes or other adjustments that reduce equity in the adjusted framework.

Return on Equity

ROE improved significantly across the period in both reported and adjusted formats. The close alignment of these ratios in later years suggests that the company’s operational performance improvements are the principal driver of returns, beyond tax or accounting adjustments.

Insights

The overall financial trends point to a company experiencing healthy growth, improving efficiency, and enhanced value generation for shareholders. The adjusted data provide a conservative lens, ensuring that non-recurring tax impacts or accounting adjustments do not inflate profitability assessments.

The financial data reveals a consistent upward trajectory in both reported and adjusted net income over the six-year period. Reported net income increased from approximately 532 million USD in 2019 to over 2.26 billion USD in 2024, more than quadrupling. Adjusted net income, excluding certain tax effects, similarly rose from about 450 million USD in 2019 to nearly 1.89 billion USD in 2024, indicating strong underlying profitability growth.

Total assets, both reported and adjusted for deferred income tax effects, have also grown steadily. Reported total assets increased from around 6.4 billion USD in 2019 to nearly 13.1 billion USD in 2024, approximately doubling over the period. Adjusted total assets followed a comparable pattern, rising from roughly 6.0 billion USD in 2019 to about 11.8 billion USD in 2024.

Return on assets (ROA) shows a notable improvement trend. Reported ROA started at 8.31% in 2019, remaining close through 2020 and 2021, then increased significantly to 17.31% by 2024. Adjusted ROA exhibited a similar pattern, beginning at 7.48% in 2019, dipping slightly through 2020 and 2021, then rising substantially to 15.96% in 2024. This improvement in ROA suggests enhanced operational efficiency and profitability relative to asset base over time, even after adjustments.

Net Income Trends

Both reported and adjusted net income consistently increased each year, with reported net income growth outpacing adjusted net income particularly in 2023 and 2024, possibly reflecting changes in tax or non-operating items.

Assets Growth

Total assets expanded steadily, with reported values consistently higher than adjusted amounts. The divergence between reported and adjusted assets widened over time, suggesting increasing deferred tax liabilities or similar adjustments.

Profitability (ROA)

ROA revealed notable improvement, especially from 2021 onward. Adjusted ROA remained slightly below reported ROA but mirrored the upward trend, indicating genuine earnings power growth excluding tax effects.

Overall, the data highlights robust financial growth characterized by rising net income and asset accumulation, coupled with improving profitability metrics. The consistency in trends between reported and adjusted figures reinforces the view of fundamentally strengthening financial performance.